The attack occurred at around 7.00 pm (2130 IST) in the predominantly Shiite Muslim neighbourhood of Baghdad Jadida (new Baghdad), said a police officer.
The bombing coincided with a visit to Baghdad by US Defence Secretary Robert Gates, who is assessing the security situation after US troops withdrew from urban centres at the end of June.
In a separate attack in the capital, 17 people were wounded by a bomb which exploded in the middle of a popular coffee shop in the northern Baghdad neighbourhood of Al-Kasra, a police officer said.
Violence had dropped markedly throughout the country in recent months but attacks increased in the run-up to the US military pullback, with 437 Iraqis killed in June -- the highest death toll in 11 months.
Attacks remain particularly common in Baghdad and the restive northern city of Mosul.
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